The constitutionality of section 32 of the Labour Relations Act

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THE CONSTITUTIONALITY OF SECTION 32 OF THE

LABOUR RELATIONS ACT

by

MICHAEL HEMSLEY

Submitted in partial fulfilment of the requirements for the degree of

MAGISTER LEGUM (LABOUR LAW)

in the Faculty of Law at the

Nelson Mandela Metropolitan University

SUPERVISOR: PROF JA VAN DER WALT JANUARY 2015

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DECLARATION

I, MICHAEL HEMSLEY, declare that the work presented in this dissertation has not been submitted before for any degree or examination and that all the sources I have used or quoted have been indicated and acknowledged as complete references. It is in this regard that I declare this work as originally mine. It is hereby presented in partial fulfilment of the requirements for the award of the Magister Legum Degree in Labour Law.

………

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SUMMARY

Collective bargaining is the process whereby employees act as a collective unit whilst negotiating terms and conditions of employment with employers. The collective unit typically takes the form of a trade union, mandated by its members to negotiate on their behalf. By negotiating collectively the inherent imbalance of power between employer and individual employee is seen to be neutralised.

The process of collective bargaining enjoys legal status in South Africa and around the world. The Industrial Conciliation Act of 1924 institutionalised collective bargaining for the first time in the form of the Industrial-Council system. This sectoral bargaining system stood firm throughout the pre-democracy period but initially excluded non-white employees. Industrial unrest in the 1970s was the catalyst for the Wiehan commission which ultimately brought all employees into the fold.

By the dawn of democracy in South Africa the bargaining system enjoyed wide-spread support and legitimacy. This was particularly so amongst the COSATU-led labour movement which enjoyed a position of political strength. This support and strength were reflected in the contents of both the Labour Relations Act and the Constitution which enshrined the constitutional right to engage in collective bargaining.

Possibly the most debated aspect of the Council system has been the question of extending agreements to non-parties. Those in favour argue that the Council system cannot function in the absence of extensions. This is so because what would then effectively be a voluntary system would not attract sufficient volunteers. Those against argue that extensions act as a barrier to economic activity, particularly for small and new businesses.

Legislation has, since 1924, facilitated the extension of agreements as long as certain criteria are met. Section 32 of the Labour Relations Act is the current

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extension vehicle. The extension criteria have vacillated over time and especially so in recent history with section 32 being subject to change in every post-democracy amendment to the Act.

Possibly the most serious challenge to the extension status quo has come in the form of a constitutional challenge by the Free-Market Foundation. The Foundation advances old economic arguments but links these to an alleged impingement of constitutional rights. The challenge comes at a time when the country is experiencing the most significant socio-political turbulence since democracy. This includes the most enduring strike in our history, a landmark-employer lock-out and a parliamentary facelift.

The Metal and Engineering Industries Bargaining Council oversees the biggest manufacturing sector in the South African economy. This status prompted the Council to submit its own responding papers in the Free-Market case. Particularly fascinating is that an employer party to the Council not only supports the Foundation case but has also lodged its own proceedings against the extension of the 2014 Engineering agreement. Both these cases are still pending and the outcomes have the potential to transform the political and economic landscape of our country.

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CHAPTER ONE

INTRODUCTION

This dissertation examines arguments for and against the legislated extension of collective agreements and in particular whether they hold constitutional muster. The examination is based primarily on papers before the Gauteng High Court in the matter between the Freemarket Foundation and the Minister of Labour (1st respondent), the Minister of Justice and Constitutional Development (2nd_respondent) and numerous registered bargaining councils (3rd_{to further respondents).}

Particular focus is placed on the responding papers of the Metal and Engineering Industry Bargaining Council. This Council is the only one of the Council respondents to have submitted an individual response to the application. It is also the largest and most influential Council within our manufacturing sector and has been the subject of recent developments which render it an intriguingly relevant case study. Their 2014 collective agreement which followed a four-week industry-wide strike has not yet been extended. This is a consequence of a pending legal challenge from one of the employer parties to the Council.

An initial foundation to the treatise is established by outlining the concept and history of collective bargaining, including a history of agreement extension in South Africa. This is a logical starting point given the inherent socio-political context of the subject matter. It would indeed be improper to conduct this examination without first formulating a thorough understanding of the origins of collective bargaining, both nationally and internationally.

The national origins are of particular relevance, given South Africa’s unique political history and the role of the labour movement therein. The movement has, however, been forced to revisit this role post-democracy in the RSA. This is a consequence of the political alliance forged with the African National Congress. This changing

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dynamic has played out within the context of a developing nation formulating policy responses to factors such as globalisation and economic recession. The impact of these factors is addressed by both parties in their respective arguments.

Attention is also given to the legal framework of collective bargaining. This sheds light on the specific question of constitutionality and also begs the question whether the courts are in fact the correct forum to adjudicate this issue.

The focus is then narrowed to those sections of the Labour Relations Act which govern the operations of bargaining councils and in particular the extension of agreements. This includes the proposed amendments thereto.

An analysis of the Freemarket Foundation application follows. The argument has both a legal and economic rationale. The legal argument tests the constitutionality of extensions on various fronts. There are two primary arguments. The first is that bargaining councils are “private actors” and as such should not be afforded the authority to impose their agreements on non-parties. The second is that current legislation governing extensions violates the principle of majoritarianism.

The economic argument is founded on the allegation that agreement extensions retard economic growth and employment with an especially negative impact on small business and the unemployed. It is alleged further that the system effectively amounts to collusion between big business and organised labour so as to protect their respective interests at the expense of fringe players and society as a whole.

The Metal and Engineering Bargaining Council submission stands juxtaposed - defending the status quo. The Foundation’s economic arguments are refuted, primarily on the basis of a lack of evidence. The Council leans heavily on the exemption system as evidence of sufficient flexibility. It is also pointed out that affected parties have access to the courts to address any grievances.

The Council strongly advocates the purported social benefits arising from a system that enjoys political legitimacy within a democratic framework. Having reference to the objectives of the Labour Relations Act it is suggested that, should there be any

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constitutional violation, this can be justified in terms of section thirty-six of the Constitution.

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CHAPTER TWO

THE CONCEPT AND HISTORY OF COLLECTIVE BARGAINING

2.1 THE CONCEPT OF COLLECTIVE BARGAINING

Collective bargaining involves employees negotiating with employers as a collective rather than as individuals. Grogan identifies this as the defining characteristic of collective bargaining, noting that it involves negotiations between parties representing groups of individuals.1_{Grogan goes on to refer to collective bargaining} as “a process by which employers and organised groups of employees seek to reconcile their conflicting interests and goals through mutual accommodation”.2 Whilst employers may prefer to negotiate contracts individually, employees are able to attain greater bargaining power through collective action. This collective is achieved through trade-union organisation which is the foundation upon which collective bargaining is built.3

Employees, represented by their trade union, may act as a collective in terms of their employment with the same employer or as a collective in terms of their employment in the same industry. The process where the collective engages with a singular employer is called plant-level bargaining.4_{Engagement with multiple employers on a} sectoral level is referred to as centralised bargaining.5

Grogan identifies the process of “bargaining” as the second defining characteristic. This process has been distinguished from consultation in that the latter does not

1 _{Grogan Collective Labour Law 8.} 2 _{Grogan Collective Labour Law 86.}

3 _{Godfrey, Maree, Du Toit and Theron Collective Bargaining in South Africa (2010) 11} (hereinafter referred to as “Collective Bargaining”).

4 _{Grogan Collective Labour Law 8.} 5 _Ibid.

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contain any element of agreement. The distinction between the two was drawn by a member of the old Industrial Court in the case of MAWU v Hart 6_{as follows:}

“To consult means to take counsel or seek information or advice from someone and does not imply any kind of agreement, whereas to bargain means to haggle or wrangle so as to arrive at some agreement on terms of give and take. The term negotiate is akin to bargaining and means to confer with a view to compromise and agreement.”

The process of “bargaining” therefore involves an element of compromise from both sides. This implies a shift from the natural balance of power that stems from an employer’s capacity to provide (or destroy) livelihoods.7_{This shift in power towards} equilibrium is achieved by arming employees with the right to withhold their labour in pursuit of their demands. This right, along with employers’ recourse to lock-out, is described by Grogan as the “fuel for collective bargaining”.8_{This is because the} execution of these rights has the consequence of collateral damage to both parties and in this way serves as a catalyst for compromise.

As an actual process collective bargaining can be triggered by a number of events. This can be upon the expiry of an existing agreement, or when existing conditions are no longer satisfactory or as a means to resolve any new dispute or grievance.9

2.1.1 DEVELOPMENT OF THE CONCEPT

The concept of collective bargaining emerged with the advent of a minority of skilled or “craft worker” unions during the nineteenth century. Faced with initial capitalist government efforts to discourage labour collectives unions managed to achieve wide-spread recognition over time. The scarce skills they possessed as a collective enabled them to engage in meaningful negotiations with employers. In South Africa the first trade unions can be traced back to the skilled printers who produced our first newspapers.10_{The discovery of gold and diamonds in the latter half of the 19}th century caused the influx of engineers and skilled artisans, mainly from the United

6 _{(1985) 6 ILJ 478 (IC).}

9 _{Nel South African Employment Relations: Theory and Practice 4}th _{ed (2002) 135.} 10 _{Nel South African Employment Relations: Theory and Practice 36.}

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Kingdom. They brought with them not only their skills but their close ties to trade unionism.11_{It is important to emphasise that the membership of these trade unions} were actively restricted for purposes of protecting against the dilution of the skills base. This strategy was aimed at protecting the living standards of the skilled artisans. Africans specifically, were viewed as a potential threat because they were seen as cheap labour which could be used by employers to undercut their higher wages.

2.1.2 THE SOCIO-POLITICAL CONTEXT

However, the social significance of collective bargaining was truly felt only after the growth of unions that also represented the mass of unskilled workers. This development in the constituency of trade unions to higher proportions of unskilled labourers was largely a consequence of a parallel transition from “manufacture” to “machinofacture”. This latter term was coined by Marx to describe the progressive introduction of machinery into the production process which tended to dilute the significance of the traditional craftsmen.12_{This was because of the sheer numbers of} persons involved and because of the reduced capacity of unskilled workers to lever higher standard of living with the tool of wage-bargaining alone. Instead the tool box was expanded to include access to social benefits and political rights. In this way the labour movements became entrenched within the political arena as well.13

In this way the institutions of collective bargaining became inextricably entwined within the socio-political framework of society. This has the consequence that these institutions cannot be divorced from the structures of political and social power around them. A clear example in South Africa’s early history was the formation of the South African Labour Party which drew the majority of its support from white trade union members.14_{Kahn-Freund highlighted this insight noting that it is far simpler to} transfer labour relations rules that relate to individuals from one country to another

11 _{Nel South African Employment Relations: Theory and Practice 37.}

12 _{Webster Cast in a Racial Mould: Labour Process and Trade Unionism in the Foundries (1985)} 40.

13 _{Grogan Collective Labour Law 2.}

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than it is to transfer rules relating to collective issues.15_{In South Africa for example} the high level of racial heterogeneity would be a distinguishing feature from most European countries. The presence of ex-slaves and indentured labourers of both Chinese and Asiatic origin has ensured a truly multicultural dynamic in South Africa.16

Despite this political aspect resulting in cyclical fluctuations (in the fortunes of collective bargaining systems), the system has proved to be a resilient and enduring phenomenon. This has been the case even in instances where the political dispensation of the times has seriously curtailed workers’ rights.17

The process of collective bargaining is by nature an adversarial one that involves negotiation between parties with conflicting interests. These parties, through this process, seek to achieve mutually acceptable compromises.18

2.1.3 COLLECTIVE BARGAINING AND THE LAW

Collective Bargaining as a concept and process is recognised and legitimized through labour law. Kahn-Freund viewed the law as a secondary force in the industrial relations environment emphasizing the fundamental inequality between employer and employee. He suggested that the law could do little to equalise this imbalance.19_{Instead the law is viewed as a mechanism to protect the institutions of} collective bargaining so as to ensure the roleplayers may engage on an equal footing notwithstanding this “natural” imbalance.20

The courts have been inclined to refrain from direct involvement in the collective-bargaining process itself. Instead the view is held that the roleplayers themselves are best positioned to shape the outcomes. It was suggested in Delisle v Canada (Deputy Attorney General)21_{that the courts should show}_{“a degree of deference”}

15 _{Bean Comparative Industrial Relations: An Introduction to Cross-National Perspectives (1985)} 5.

16 _{Nel South African Employment Relations: Theory and Practice 37.} 17 _{Godfrey et al Collective Bargaining 1}

18 _Ibid.

19 _{Godfrey et al}_{“Collective Bargaining 4.} 20 _Ibid.

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based on conscious recognition of the complexity and the balance sought to be struck by legislation among the interests of labour, management, and the public.

This autonomy of the collective bargaining system has been viewed as a fundamental principle in legal systems around the globe, giving rise to classic concepts such as “collective laissez-faire” in Britain, “Tarifautonomie” in Germany and “L’autonomie collective” in France.22_{It appears as though the democratic South} African Government, notwithstanding its legislative duty to promote and encourage collective bargaining, has adopted a similar philosophy. This is evident by the absence of any programmes to assist statutory and bargaining councils.23_{Section 1} of the LRA, which outlines the purpose of the Act, provides a further clue in support of this angle. This is evidenced in the wording of “providing a framework” for collective bargaining which is indicative of a voluntarist approach where the rules rather than the outcome are dictated by Government.24_{This “hands-off” approach by} Government has, however, been tested in times of economic pressure and in particular as a consequence of globalisation. A good example of state interventionism that pre-dates globalisation occurred during the economic depression of the 1930s which changed public opinion towards greater state intervention. In fact, an underlying assumption of the New Deal was that the imbalance in power between employers and employees was not only the cause of labour unrest but also served to aggravate the economic conditions by reducing the spending power of workers.25

2.1.4 INSTITUTIONALISED COLLECTIVE BARGAINING

The process of collective bargaining takes on an institutionalised form when it occurs within the scope of a country’s legal framework. In South Africa this framework begins with the Constitution, where the right to bargain collectively has been entrenched and where it is stipulated that national legislation may be enacted to

22 _Bruun _{“The Autonomy of Collective Agreement” in Blanpain (ed) Collective Bargaining,}

Discrimination, Social Security and European Integration (2003) 5.

23 _{Godfrey et al Collective Bargaining 125.} 24 _{Grogan Collective Labour Law 7.}

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regulate collective bargaining.26_{Typically such legislation would be designed to} govern the manner in which the major industrial stakeholders, capital and labour, interact with each other on issues where there is mutual but conflicting interest. The Labour Relations Act 66 of 1995 is this enabling legislation in South Africa and has as one of its primary purposes the provision of a framework for employees and employers to bargain collectively.27

It is at the sectoral level (rather than plant level) where governments have seen fit to facilitate formalised legal institutions through which the bargaining process can be properly managed. In South Africa these institutions were initially known as industrial councils but in terms of current legislation are referred to as bargaining councils.28 The primary objective behind the establishment of these industry councils is to secure a measure of stability and efficiency in key engine rooms of the country’s economy and includes dispute resolution. This is a central objective of all modern industrial relations legislation.29_{The establishment of bargaining councils is on a} voluntary basis but once they have been formally registered these councils acquire regulatory functions in terms of the LRA.30_{They also acquire a corporate identity in} that they can sue and be sued.31

In South Africa there is a forum of institutionalised engagement between the three major social partners that exists at a level higher than mere industry bargaining. This forum is known as NEDLAC and it serves as a platform for seeking consensus rather than a process of bargaining in its purest form.

Trade unions are the conduit through which labour represents its interest at the council. Whether at plant level or industry level, trade unions provide the solidarity and power to the voice of the individual employee. This union power that is achieved as a balancing mechanism in response to the natural power of employers has an ironic and corollary impact on the other side of the labour equation. This impact is

26 _{S 23(5) of the Constitution of the Republic of South Africa Act 108 of 1996.} 27 _{S 1(c) of the Labour Relations Act 66 of 1995.}

28 _{This change in name was effected in terms of the Labour Relations Act 66 of 1995.} 29 _{Grogan Collective Labour Law 85.}

30 _{Van der Walt, Le Roux and Govindjee Labour Law in Context (2012) 191.} 31 _{Grogan Collective Labour Law 74.}

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that employers, and more specifically smaller, less resourced employers, are driven to seek solidarity (and indeed a measure of security) in the face of union power and militancy. This is achieved, in much the same way as by employees, by acting on a collective basis, and the vehicle through which this is achieved is known as an employer’s organisation.

Employers’ organisations and trade unions are referred to as the “parties” to the industry councils. The first-mentioned represent capital’s interests and the other labour’s interests on the council. Both trade unions and employer organisations are statutory bodies themselves and are required to be registered in terms of the LRA. The current process of establishing a council in South Africa requires an application to the registrar by registered trade unions and employer organisations.32_This application together with any objections, is assessed by NEDLAC and, if necessary, the Minister of Labour. NEDLAC is empowered to decide on appropriate demarcation. The primary criterion is the representivity of the parties within the specific demarcated area. These demarcations occur along two major lines, namely the nature of the work or business and secondly, the geographic area of application. Together these two criteria form what is known as the scope of the council.

In the case of some industries there is no geographic demarcation in that a national council determines terms and conditions of service for the entire country.33_{In other} industries geographically dislocated councils have the autonomy to determine different conditions of service within the same industry.34

An application for registration of a council shall not receive consideration without the submission of a council constitution which conforms with section 30 of the LRA.35 This statutory requirement is the means for ensuring the objective of good governance within councils and, by extension, the industry concerned. The

32 _{In terms of s 29 of the LRA.}

33 _{The Metal and Engineering Industry is an example in South Africa where centralised} negotiations determine conditions throughout the Republic of South Africa. There is decentralisation in terms of local councils but their role is to manage the affairs of the national council on a local level.

34 _{An example of decentralised geographically determined councils within the same industry in} South Africa is the furniture industry.

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constitution must include matters such as the appointment of party representatives and council officials, the procedure for handling disputes amongst parties and the financial management of the council. Importantly in the context of this treatise the constitution must provide for the representation of small and medium enterprises36 and a procedure for exemption from collective agreements.37

Even more importantly in the context of this dissertation is the concept of “non-parties”. This status can occur on two levels. Firstly there are those employers and employees that are non-parties to the council in that the employers are not members of an employers’ organisation party to the council, or the employee is not a member of a trade union that is party to the council. This status as a non-party to the council does not exclude the possibility of being a member of a trade union or employers’ organisation – only, it would not be a representative body that is a party to the council. The second level of non-party status is being a non-party to a specific agreement. It can happen, for example, that an employers’ organisation might be party to a bargaining council but is not a signatory to a specific agreement. In this way any of the members of that employers’ organisation would be regarded as party employers in the context of the council but non-party employers in the context of any agreement. This is an important concept to understand when examining the key thrust of this treatise which is the extension of agreements to non-parties.

36 _{S 30(1)(b).} 37 _{S 30(1)(k).}

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CHAPTER THREE

THE HISTORY OF COLLECTIVE BARGAINING

3.1 THE ADVENT OF COLLECTIVE BARGAINING

The term was first coined by British Labour-movement pioneer, Beatrice Webb, in 1891 but the practice itself had become commonplace in European countries before this date.38_{The concept of workers combining on a collective basis can be traced} back as far as the 17th_{century with the advent of the Industrial Revolution.}39_This was a consequence of a process of labour-law liberalisation in the Western World that had followed the initial resistance to unions in the earlier half of the nineteenth century.40_{Unfortunately for the labour movement the progress that had occurred in} Europe was not mirrored in the colonies over which Europe ruled.41_{By the end of} the First World War there were no laws in the Union of South Africa that sought to regulate organised labour.42_{The Masters and servant Act of 1841 was the first} legislation that was introduced to govern employer-worker relations but this was on a bilateral level and did not address issues of worker representation.43

3.2 THE INDUSTRIAL CONCILIATION ACT OF 1924

In South Africa collective bargaining has been officially recognised as an institution since 1924.44_{This recognition came in the form of the Industrial Conciliation Act}45 which was largely a response to an armed uprising of white workers in 1922. This was the first comprehensive piece of labour legislation in South Africa and its focus

38 _{Godfrey et al Collective Bargaining 1.}

39 _{Nel South African Employment Relations: Theory and Practice 133.} 40 _{Grogan Collective Labour Law 2.}

41 _Ibid.

43 _{Nel South African Employment Relations: Theory and Practice 36.} 44 _{Godfrey et al Collective Bargaining 16.}

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was on collective labour rights.46_{Individual labour rights were covered in terms of} the Wage Act which followed a year later.47

The primary grievance of these white workers was a demand for protection against a perceived threat of cheap African labour.48_{Though harshly dealt with, the white} miners did succeed in achieving protection through the exclusion of Africans from the Industrial Council system. This was achieved by excluding Africans from the definition of “employee” with a concomitant limitation on membership of trade unions to “employees”.49

This structure of excluding blacks assisted in achieving the first of two political objectives of the Act. This first of these objectives was to provide preferential employment opportunities for white workers as a means to address the “poor white” problem.50_{The second political objective was to prop up General Smuts’ political} base after it had been eroded significantly following the 1922 strikes.51

The central objective of the 1924 Act from a frame-work point of view was to facilitate industrial self-governance.52_{The mechanics to achieve this objective was a network} of industry specific councils, comprised of employer and employee representatives. The thinking was that these parties to the council would be left to their own devices to resolve disputes within their scope of registration.53_{A feature of the South African} collective-bargaining landscape is that the system of councils has not been imposed upon the respective sectors.54_{The exception to this is the national and provincial} state departments.55

46 _{Grogan Collective Bargaining 3.} 47 _Ibid.

48 _{Godfrey et al Collective Bargaining 18.} 49 _Ibid.

50 _{Jones Collective Bargaining in South Africa 2}nd_{ed (1985) 24.} 51 _Ibid.

52 _{Notice of Motion 19.} 53 _Ibid.

54 _{Van der Walt et al Labour Law in Context 188.} 55 _Ibid.

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One negative “side-affect” of the exclusion of Africans from the ambit of the legislation was that they could not be bound by the extension of council agreements.56_{This created a loophole and served to thwart the objective of} preventing unfair competition on wages. The legislature took steps to close this loophole during the following decade such that extensions became binding in respect of African employees.57

3.3 DEVELOPMENTS IN SOUTH AFRICA FROM 1937 TO 1979

In the amendments of 1937 an allowance was made for “pass-bearing” African workers to be overseen by a newly formed labour inspectorate.58_{The 1947 Industrial} (Natives) Act Bill was introduced by the United Party Government following a period of organisation of black labour in the 1940s. This Bill, had it been enacted would have recognised African Unions even though they would still have been excluded from the Industrial Council system. However, even this limited progress was blocked following the election of the Nationalist Government in 1948, which proceeded to scrap the bill.59_{The allowances made in terms of the 1937 amendments also came} to an end when legislation was amended such that Africans were again no longer classified as employees.60_{The racial policies of the Nationalist Government were} endorsed in terms of the Industrial Conciliation Act of 195661_{and the Black Labour} Relations Regulations Act of 1953.62

It must be noted, however, that this only restricted black membership in registered trade unions and did not prevent the formation of unregistered black trade unions.63 Such unregistered black unions were not illegal and did exist but had to operate outside of the Industrial Conciliations Act, and as such were unable to conclude legally enforceable industry agreements.64_{Their existence was often fleeting and}

56 _{Notice of Motion 20.} 57 _Ibid.

59 _{Webster Cast in a Racial Mould: Labour Processes and Trade Unionism in the Foundries 61} 60 _{Grogan Collective Labour Law 3.}

61 _{28 of 1956.} 62 _{48 of 1953.}

63 _{Jones Collective Bargaining in South Africa 28.} 64 _Ibid.

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they came under pressure from the Government in a number of ways.65_This pressure was often aimed at its leaders by way of detention, gaol and banning orders.66_{As a consequence these unions struggled to build any worthwhile} momentum, that is, until the Natal strikes of 1973 and the Soweto uprisings in 1976 which proved to be a timely shot in the arm.67

The economic growth following the 2nd world war was accompanied by a parallel evolution in the emergence of stable collective bargaining systems.68_{This relative} stability was, however, undermined with the increased integration of global markets post 1970.69_{These markets, dominated by multinational corporations fundamentally} transformed the labour-market landscape.70_{This was because of the impact of} collective agreements on the labour markets in times of growing international competition.71_{The economic stakes for the national Government became too high to} be left in the hands of private players alone.72_{Instead, the strategy developed to one} of seeking pacts with the respective social partners so as to create synergy between bargaining outcomes and Government policy.73

The wave of mass strikes in Natal in 1973 involving 100 000 African and Indian workers was a direct cause for the formal establishment of MAWU in Pietermaritzburg in April of that year.74_{This can be contrasted with a large strike by} 71 000 black workers on the mines in 1920 which was easily dealt with because there was no union organisation. Strikers were also isolated from one another because of the compound system on the mines.75

65 _{Jones Collective Bargaining in South Africa 29.} 66 _Ibid.

67 _Ibid.

68 _{Godfrey et al Collective Bargaining 2.} 69 _{Godfrey et al Collective Bargaining 3.} 70 _Ibid.

73 _Ibid.

74 _{Webster Cast in a Racial Mould: Labour Process and Trade Unionism in the Foundries.} 75 _{Finnemore Introduction to Industrial Relations in South Africa 28.}

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3.4 THE WIEHAHN COMMISSION

In much the same way that the Smuts Government of 1924 could not ignore the reality of the 1922 strikes the Nationalist Government was also forced into action.76 The first step was the appointment of a commission headed by Professor Wiehahn which recommended labour-law reforms. The most significant reform was the removal of the exclusion of black workers from the labour legislation.77

A significant pre-democracy milestone for collective bargaining in South Africa was the Wiehahn Commission of Inquiry of 1979. This inquiry was commissioned following strikes amongst black workers in the Durban area in 1973, followed by the emergence of new African trade unions.78_{These developments were perceived as a} threat to the existing industrial-relation system as well as white-minority rule itself.79 The conclusion drawn by the commission was that racially segregated bargaining institutions were unsustainable and it was recommended that they be abolished.80 The following amendment to the Labour Relations Act in 1981 established the first completely non-racial labour statute.81_{This was achieved by virtue of the following} new wide definition of “employee”:

“Any person who is employed by, or working for, any employer, and receiving, or entitled to receive, any renumeration, and any other person whatsoever who in any manner assists in the carrying on or conducting of the business of an employer.”82 In 1978, just prior to the changes following the Wiehahn report, there were 70 000 black members of 27 unregistered unions.83_{Four years later in 1982 there were} 579 000 black employees that were members of registered trade unions.84

76 _{Grogan Collective Labour Law 3.} 77 _{Grogan Collective Labour Law 4.} 78 _{Godfrey et al Collective Bargaining 18.} 79 _Ibid.

80 _Ibid.

81 _{Jones Collective Bargaining in South Africa 29. Blacks were included in terms of the definition} that was changed in 1979 but it was structured in such a way that it only included urban blacks. This caused black unions to be faced with a dilemma whereby registration required them to shed their non-urban members which included migrants, frontier commuters and foreign blacks. 82 _{Jones Collective Bargaining in South Africa 25.}

83 _{Jones Collective Bargaining in South Africa 47.} 84 _{Jones Collective Bargaining in South Africa 48.}

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This shift in the political and economic dynamics underpinning industrial councils from the 1970s did not undermine the significance of their pivotal role within the South African Labour Relations framework. In fact, their numbers reached a high in 1983 when there were 104 in operation.85_{By 2004 the number of councils had} declined significantly but the number of employees covered by councils had doubled. This apparent anomaly was caused by the advent, after 1995, of four large public-sector bargaining councils.86_{By 2012 approximately 20.3 percent of the total labour} force in South Africa was covered by Bargaining Councils.87

3.5 POST-APARTHEID

This has been the case in post-apartheid South Africa, with the Department of Labour publishing five-year plans of action clarifying their priorities within the broader regulatory framework.88_{This partnership sentiment has been shared in Europe} where a research report viewed collective bargaining and legislation as being complementary.89

Halton Cheadle, in South Africa, views collective bargaining as a means to implement the “fair labour practices” as mandated by our primary source of legislation, namely the Constitution.90_{Section 23(5) of the Constitution guarantees} the right of trade unions and employers’ organisations to engage in collective bargaining.91_{The fact that South Africa adopted a constitutional dispensation post} 1994 represented a significant shift in respect of the rights of its subjects.92_{This was} because subjects were no longer singularly dependent on the will of Parliament. Instead, the Constitution serves to protect rights by ensuring that legislation emanating from Parliament complies with said Constitution.93_{It is important to note}

85 _{http://www.humancapitalreview.org/content/default.asp?Article_ID=1026}_{accessed on 2 July} 2014 article by Maree“ Collective Bargaining Trends in South Africa and Contemporary Challenges”.

86 _Ibid.

87 _{Van der Walt et al Labour Law in Context 188.} 88 _{Godfrey et al Collective Bargaining 7.}

89 _Ibid. 90 _Ibid.

91 _{Constitution of the Republic of South Africa 1996.} 92 _{Grogan Collective Labour Law 10.}

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that notwithstanding the constitutional entrenchment of the right to bargain there is no duty to bargain imposed on employers.94

It was in fact the Interim Constitution95_{which played an initial role in shaping the new} labour legislation post-apartheid to the extent that it set out to comply with South Africa’s international law obligations. This Constitution included the right to join and form trade unions, to bargain collectively and the right to strike.96_{The fact that these} labour rights were entrenched in the Constitution is indicative of the drafters’ intentions to avoid the abuse of unions that occurred under the old regime.97_The Interim Constitution became effective in April of 1994 and consequently influenced the ensuing debate on labour legislation which was high on Government agenda, given the role that the labour movement had played in dismantling apartheid. It also helped that there had been a large scale movement of union leaders into party politics immediately after political transition.98

The labour movement was headed by the trade-union federation COSATU99_which formed an integral part of the tri-partite political alliance with the African National Congress and the South African Communist Party. Their views on collective bargaining structures at the onset of democracy were set out at their Campaigns conference in 1994.100_{The Congress had concrete views in this regard calling for} centralised bargaining in specifically demarcated sectors on a co-ordinated basis which could involve the amalgamation of existing councils. The strength of the views was illustrated in a call for legislation that would compel centralised bargaining.101

This strong support for centralised collective bargaining by the trade union constituency from the 1990’s stood in contrast to previous feelings of distrust towards the council system. This distrust emanated from the long-time exclusion of black workers from the council system and the prejudice they had suffered as a result.

95 _{Constitution of the Republic of South Africa 1993.} 96 _{Godfrey et al Collective Bargaining 81.}

99 _{Congress of South African Trade Unions.} 100 _{Godfrey et al Collective Bargaining 82.}

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This had the consequence that even after the post-Wiehahn reforms black trade unions continued to prioritise plant-level organisation. However, by the late eighties the benefits of centralised collective bargaining had become clear to COSATU. The African National Congress held similar views and specifically highlighted collective bargaining as an important component of their reconstruction and development

programme (RDP).102

COSATU’s research arm, NALEDI103_{produced a discussion paper shortly after the} conference wherein they expanded on COSATU’s centralised bargaining policy. This paper supported the extension of agreements favouring a concept of “framework agreements”.104_{Such agreements set out only basic conditions of employment} which left room for plant-level bargaining on issues that were not contained in the framework agreement.105_{It was envisaged that such a system would be able to} accommodate lesser-resourced enterprises and reduce the required number of exemption applications.106

At the time of political transition Business South Africa (BSA) also offered their support for the underlying principles of the council system. BSA also offered support for the extension of agreements albeit under certain conditions, most notably an effective exemption system.107

3.6 THE IMPACT OF GLOBALISATION

The spine of collective bargaining is trade unionism, and consequently any pressure exerted on this vital organ, impacts directly on the health of the collective institution. This section examines the impact of globalisation on both the spine and the “mother body”. The term “globalisation” has been defined by a number of authors. Tomlinson described it as a complex connectivity in which there is “the rapidly

102 _{Finnemore Introduction to Industrial Relations in South Africa 196.} 103 _{National Labour and Economic Development Institute.}

106 _Ibid.

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developing and ever-densening network of interconnections and interdependencies that characterises modern social life”.108

The collapse of the apartheid regime ended the politically motivated economic sanctions imposed on South Africa. This process opened the country up to a whole new world of globalisation. Whilst these developments would undoubtedly have resulted in significant social improvements for workers in South Africa it did bring with it some stern challenges for the trade-union movement.109_{Arguably the biggest of} these were the response and plans required from local employers in order to compete in the global economy. These plans often included investment in new technology, flexible work practices as well as a reduced demand for labour.110_These factors contributed to unemployment rates which impacted negatively on trade-union membership. 500 000 jobs were lost in South Africa between the period 1994 and 2000.111_{Even though the economic growth rate increased in the period until 2007} this did not serve to make any serious dent on the high unemployment levels in the country.112_{The challenges faced by employers when re-entering the global market} place caused a strong business lobby for Government support.113_{Notwithstanding} the political alliance between the ANC and COSATU this lobby made useful gains culminating in the 1996 “GEAR” policy.114

An analysis of trade union membership trends indicates a variety of factors that play an influencing role. The three key sets of factors can be categorised as cyclical, structural and institutional.115_{Cyclical factors refer to rising unemployment in times} of economic downturn. It is generally accepted that a downturn would impact negatively on membership but it has been shown that this is not always the case. The level of bargaining is an example of a variable which may oppose this trend.

108 _{Watson Sociology, Work and Organisation 6}th _{ed (2011).} 109 _{Finnemore Introduction to Labour Relations in South Africa 43.} 110 _Ibid.

111 _Ibid.

112 _{Finnemore Introduction to Labour Relations in South Africa 46.} 113 _{Finnemore Introduction to Labour Relations in South Africa 44.}

114 _{The ANC Government’s Growth, Employment and Redistribution Policy leaned far closer to} liberal free market ideology and was the guide for economic policy over the next ten years. 115 _{Godfrey et al Collective Bargaining 11.}

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Where the bargaining is conducted at a higher, multi-employer level unionisation levels have proved to be less vulnerable.116

Structural factors are now accepted to be a greater cause of union decline than unemployment.117_{The neo-liberal economic policies associated with free-market} economies strongly advocate labour-market flexibility.118_{This has the consequence} of increased part-time and casual work which hinders union-organisation potential. Other trends associated with globalisation include privatization, downsizing and outsourcing. These have all tended to erode the traditional operating base for trade unions.

The impact on the mother-body of collective bargaining (and bargaining councils in particular) is the indirect impact of these trends on council representivity. This is because one of the measures of council representivity is party trade-union membership within the sector. This particular problem has been debated by labour-department officials, with one suggested solution being that all “atypical” employees be excluded from the calculation of representivity.119_{This is because of the degree} of difficulty for union organisation amongst this particular grouping. A second idea that has been floated is the compulsion that outsourced employees remain or become members of the majority trade-union party.120_{Standing in the way of that} suggestion is that it will fall foul of the principle of freedom of association and would most likely attract a constitutional challenge.121

3.7 THE HISTORY OF AGREEMENT EXTENSION

An important sub-component of the history of collective bargaining in South Africa, in the context of this dissertation, is the history of objections to the extension of collective agreements. The fact that there has been a specific history in this regard indicates that the current objection by the FMF is not a new one and that this issue

116 _{Boeri, Brugiavini and Calmfors (eds) The Role of Unions in the 21}st_{Century (2001) 34.}

117 _{Godfrey et al Collective Bargaining 12.}

118 _Rongshu: _Impacts _of _{Globalization} _on _the _trade _union _movement

http://www.acftu.org.cn/template/10002/file.jsp?cid=40&aid=105 (accessed 23 April 2014). 119 _{Godfrey et al Collective Bargaining 125.}

120 _Ibid. 121 _Ibid.

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has received considerable previous attention from all the social partners. This point is emphasized by the MEIBC in their answering affidavit in order to highlight the fact that the current legislative dispensation is a product of this extensive debate.

Going back to the Act of 1924 the Minister had powers of extension to all employers and employees as long as he regarded it as expedient and as long as the parties were “sufficiently representative”. The Act of 1937 had little impact on the status quo with the relevant section 48(2), also making reference to expediency and sufficient representivity.122_{What is clear at that point in time was that the Minister was} provided with a degree of discretion which included the capacity to grant limited exemptions.123

The Industrial Conciliations Act of 1956 (later renamed the Labour Relations Act of 1956) was promulgated under the watch of the National Party which had come into power in 1948. This Act was amended on numerous occasions before its final demise when repealed by the current LRA. At the time it was repealed extensions were still subject to the criteria of sufficient representivity and expediency. One development from the 1937 Act was that the Council themselves could grant exemptions as opposed to the Minister only.124

The all-important question of what constituted sufficient representivity was not answered by the 1956 Act125_{in the form of a clear definition. However, the then} Director General of Labour stated three relevant measures.126_{Significantly this did} include an assessment of party employers as a percentage of all employers, which is not the case under the current legislation. The other two measures were an assessment of employees at party firms relative to the industry and the number of union employees relative to the industry.127

122 _{Answering affidavit of the 20}th_{respondent: The MEIBC par 28.} 123 _{S 51(1) of the Industrial Conciliation Act of 1937.}

124 _{Answering affidavit of the 20}th_{respondent: The MEIBC par 31.} 125 _{Labour Relations Act 28 of 1956.}

126 _{Answering affidavit of respondent 20: The MEIBC par 34.} 127 _Ibid.

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If a 50% measure were achieved in all three assessment categories then the Council would be considered representative. However, even if 50% were not achieved on all measures the Minister had discretion to extend after due consideration of a number of other factors. These factors included the restrictiveness of the agreement on new businesses, the level of consultation with non-parties, wage differentiation flexibility, flexibility towards new entrants and small employers and accommodation through exemptions.128_{A research study undertaken in 1994 / 1995 showed, in the opinion} of Godfrey, that the Minister used to exercise his discretion in favour of extensions.129

The most significant juncture in this particular historical sub-component occurred at the transition to political democracy. This was the first time that all social partners across the political and economic spectrum engaged in debate on this particular issue. The significance of this juncture, it is argued, lies not only in the breadth of the discussion but more particularly so by virtue of its depth.

A significant intervention by the ILO in the early 1990s is said to have strongly influenced the thinking that underpinned the post-apartheid legislation specifically as it pertained to the extension of bargaining-council agreements. 130_{This intervention} was effected by the ILO’s Fact Finding and Conciliation Commission of South Africa in February 1992 (FFCC). The intervention was precipitated by a complaint from COSATU regarding the Minister’s discretion not to extend agreements. This complaint had arisen following three separate occasions where the Minister had applied his discretion in this manner.

The FFCC report emphasized the principles of voluntarism and non-intervention as espoused by the ILO supervisory bodies.131_{The report noted that intervention by} public authorities should only be justifiable for major economic or social reasons or in the general interest.132_{Importantly, in the context of this paper, the FFCC supported} limited intervention (by the Minister) in respect of freely-concluded agreements. It was their position that intervention should be restricted to technical matters only. An

128 _{Answering affidavit of respondent 20: The MEIBC par 35.} 129 _{Answering affidavit of respondent 20: The MEIBC par 36.} 130 _{Answering affidavit of respondent 20: The MEIBC par 41.} 131 _{At par 709.}

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example would be compliance with minimum labour legislation.133_{It is noteworthy} that the explanatory memorandum for the Draft Labour Relations Bill of 1995 specifically included the FFCC report as one of the reference points of the bill.134

The Labour Force Survey (LFS) conducted in 2004 estimated that Bargaining Councils covered 20.3% of the total labour force in South Africa.135_{The survey} provided a breakdown of coverage across the economy indicating that in four of the five major sectors there was no coverage at all.136_{Of the remaining five sectors} there was only significant coverage in three of them. 137 _{These were the} manufacturing, transport and community services.138

The total picture from the survey is that of 7 241 951 employees employed nationally only 2 358 012 are registered with councils and only 335 420 are employees at non-party firms.139_{This represents a percentage of only 4.6% of all employees which are} employed at non-party employers and covered by bargaining councils. Whilst this might appear to be an insignificant number it has been noted that the number of non-party employees reflected in the survey are only those employees employed at registered non-party employers.140_{It does not reflect the number of employees} employed at non-registered non-party employers. As such it is conceded by the authors of the survey that undercounting of employees covered by extended agreements is a reality.141

133 _{At par 710.}

134 _{Explanatory memorandum (1995) 16 ILJ 278 at 278-279.} 135 _{Godfrey et al Collective Bargaining 114.}

138 _Ibid.

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CHAPTER FOUR

THE CURRENT LEGISLATIVE FRAMEWORK

4.1 THE COLLECTIVE-BARGAINING FRAMEWORK

The Bargaining Council system forms an integral part of South Africa’s labour relations framework in terms of current legislation.142_{The collective-bargaining} provisions in the LRA are extensive, effectively constituting the spine of the South African labour relations framework. This framework is outlined in Chapter Three of the Act which follows the introductory and general protection chapters respectively.143

The first section of the Act in the introductory chapter describes its purpose, which includes the provision of a framework for collective bargaining in respect of wages and other conditions of employment. This is one of three key purposes of the Act, the other two being giving effect to constitutional obligations144_{as well as those} obligations incurred by virtue of our associations with the International Labour Organisation.145

The Freedom of Association in chapter two provides the initial brace for the spine by removing any restrictions to the existence of its components. These components or “parties” to the bargaining-council system are the trade unions on the one hand and the employer organisations on the other.

The base of the spine is found in part A of Chapter Three. Part A provides a strong foundation for the trade-union party by providing for extensive organisational

142 _{Act 66 of 1995.}

143 _{Chapter One of the Act covers the purpose, application and interpretations of the Act whilst} chapter two covers freedom of Association and General protections.

144 _{S 1(a) of Act 66 of 1995.} 145 _{S 1(b) of Act 66 of 1995.}

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rights.146_{At the heart of the structure is the provision for}_{“soldiers on the ground” in} the form of union representatives in the work place.147_{These foot soldiers constitute} a crucial operating nexus between plant-level aspirations and centralised bargaining mandates. They also play a pivotal role in monitoring compliance with the resultant negotiated collective agreements.148

Equally important for purposes of sustainability is the facilitation of union funding from its members and access to the workplace by its officials.149_{The legislation serves to} bolster the collective bargaining environment further by providing for agency-shop and closed shop agreements.150_{An agency shop agreement enables a union with a} majority of members employed in a workplace or by an employer’s organisation to

deduct an agency fee from non-members.151_{This agency agreement overrides any}

other law or contractual provision in that the deduction may be effected without the authorisation of the non-member.152

4.2 THE OPERATION OF BARGAINING COUNCILS

The functions and powers of bargaining councils in terms of current legislation are outlined in section 28 of the Labour Relations Act.153_{The core functions include the} conclusion and enforcement of collective agreements.154_{Other important functions} of councils are dispute resolution,155_{the promotion of training and education} schemes156_{as well as the administration of industry benefit funds.}157

146 _{Ss 11-22 of the Labour Relations Act 66 of 1995.} 147 _{Provided for in s 11 of Act 66 of 1995.}

148 _{S 14(4)(b) of the Act provides the right for union representatives to monitor compliance and s} 14(4)(c) provides for the right to report any contraventions to the employer, trade union or any other valid authority.

149 _{Ss 13 and 12 of Act 66 of 1995.} 150 _{Ss 25 and 26 of Act 66 of 1995.} 151 _{S25(1) of Act 66 of 1995.} 152 _{S 25(4)(a) of Act 66 of 1995.} 153 _{Act 66 of 1995.} 154 _{S 28(1)(a) and s 28(1)(b).} 155 _{S 28(1)(c) and (d).} 156 _{S 28(1)(f).} 157 _{S 28(1)(g).}

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For the purposes of enforcement bargaining councils have the authority to appoint council agents who perform a role not dissimilar to that played by department of labour inspectors empowered to enforce primary labour legislation such as the Basic Conditions of Employment Act.158

The powers of a bargaining-council agent are outlined in Schedule 10 of the LRA.159 These powers provide the agent right of entry (into a workplace) without warrant or notice and to require persons to disclose information relating to the implementation of the relevant collective agreement.160_{This disclosure may be required under oath or} affirmation.161_{Any false statement in response to a question posed by a council} agent may be used against that person in criminal proceedings relating to perjury.162 The council agents enjoy the backing of the Labour Court which is empowered to issue an order against any person resisting the lawful requirements imposed by council agents.163

Council agents are empowered to issue compliance notices in cases of non-compliance with council agreements. Arbitration, with the council as the applicant, shall follow in the event of a failure to adhere to the dictates of the order. An arbitrator nominated by the council, alternatively a CCMA commissioner, shall hear the matter and shall be empowered to make remedial and / or punitive awards if he/she finds in favour of the council. Awards of this nature are final and binding and executable in the same manner as those of orders of the Labour Court.

The collective agreements (which agents are tasked to enforce) become binding on parties and non-parties to the agreement in terms of sections 31 and 32 of the LRA respectively.164_{Those considered as}_{“parties” to the agreement are the respective} employer organisations and trade unions who are signatories to the agreement as well as their respective members which include individual employers and employees.

158 _{75 of 1997.} 159 _{66 of 1995.}

160 _{Schedule 10(1) of Act 66 of 1995.} 161 _{Schedule 10(5)(a) of Act 66 of 1995.} 162 _{Schedule 10(9) of Act 66 of 1995.} 163 _{Schedule 10(11) of Act 66 of 1995.} 164 _{66 of 1995.}

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The agreement becomes legally binding on all these parties upon signing of the collective agreement.165_{It is worth mentioning that the parties to an agreement might} not include all the parties to a bargaining council. It can therefore transpire that parties to a bargaining council may be classified as non-parties in relation to any specific collective agreement. As such the bargaining council non-parties and all other non-parties would fall into the same boat in so far as becoming bound by the extension of the collective agreement in terms of section 32.

The legal obligation to comply with a collective agreement in terms of section 31 is typically less of a driving force (than in the case of non-parties) because parties are voluntary signatories to the agreement. There will, however, always be differing levels of satisfaction even amongst the parties to agreements, and as such there will certainly be occasion where council agents are required to utilise their powers to enforce compliance within the ranks of the parties.

It is, however, the legal obligation that is founded in section 32 which has courted extensive and emotive debate since the inception of the Act. This is because the compliance is enforced on an involuntary basis by extending the agreement to the non-parties. This debate is ongoing and current and forms the essential subject matter of this treatise. It is therefore imperative to provide a thorough analysis of the mechanics of section 32.

4.3 THE MECHANICS OF SECTION 32

The first hurdle to the extension of a collective agreement in terms of this section 32 is that a majority of the party trade unions and a majority of the party employer organisations must vote in favour of the extension.166_{This vote must take place at a} meeting of the Council and the non-parties to whom the agreement is extended must be identified and they must fall within the registered scope of the Council. If this hurdle is crossed the Council may then elect to request the Minister to extend the agreement to such non-parties.

165 _{S 31 of Act 66 of 1995.} 166 _{Ss (1)(a) and (1)(b).}

The constitutionality of section 32 of the Labour Relations Act